Market Overview

Handbag Momentum Is Helping Kate Spade And Coach, While Lululemon's Pant Wall Is A Hit

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  • While the shares of Kate Spade & Co (NYSE: KATE) and Coach Inc (NYSE: COH) have declined in mid-double-digit percentages YTD, Lululemon Athletica inc. (NASDAQ: LULU) shares are down 3 percent.
  • Wedbush’s Morry Brown has Outperform ratings on all three companies.
  • Brown commented on the promotional activities undertaken and the consequent sales generated by the three companies.

Wedbush’s channel checks evaluated the promotional and clearance environment in various stores in the Specialty Retail sector. Analyst Morry Brown commented on the merchandising, pricing and inventory as well.

Kate Spade: Strong Start in Plaid Handbags and Accessories

The company ramped up the promotions being offered in stores during early September, introducing a new 25 percent off clearance event in the first week and a Buy More Save More event in the second week.

“Traffic levels during the month were steady and sell through of plaid handbags was impressive with some stores selling out. Managers said sell through on accessories of the new plaid line were strong, while clothing has been a little slower to move given the warm weather,” Brown wrote.

Wedbush has a $32 price target for Kate Spade. “…our checks have consistently noted KATE as the least promotional and best merchandised handbag brand compared to peers,” the report stated.

Coach: Sales Generated by Coupon Event and NYFW Presentation

The company offered preferred shopping coupons, which generated “some” traffic in stores and select customers received discounts up to 30 percent during September 17-27. “We also saw some excitement around Coach’s September 15 presentation at New York Fashion Week,” Brown added.

Although Coach’s website indicates that the bags were sold out online, the SOHO and Rodeo stores had inventories remaining in several colors. “The bags are priced from $395 to $695 and will offer a fresh silhouette for their spring 2016 collection,” the analyst said.

Brown has a $32 price target for Coach.

Lululemon: Customers Take To New Pant Wall

The company introduced its new pant wall on September 1, “shifting fit categorization by sensation and activity rather than silhouette.” The new pant wall was coupled with new technology launches and price hikes.

“We view the transition favorably as it provides a reason for associates to promote new products such as the Tight Stuff Tight *Reflective pant (tight sensation) and the Align pant (naked sensation),” the Wedbush report mentioned.

Brown added that checks had indicated “positive customer response to the newly introduced Align pant (made with NuLu fabric) and little-to-no resistance to higher prices.”

Wedbush has a $78 price target for Lululemon. “We see multiple potential catalysts for LULU shares to trade higher in the next 12-18 months…We believe the primary risk (increased competition) is unlikely to derail fundamentals in the near term (assuming solid execution),” Brown noted.

Posted-In: WedbushAnalyst Color Reiteration Analyst Ratings

 

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